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Rolled up Holiday Pay - Unlawful

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This morning the ECJ handed down judgment in the rolled-up holiday pay cases. The judgment is already being heralded - misleadingly - as preventing rolled-up holiday pay.

Essentially, the ECJ has ruled that rolled-up holiday pay is, prima facie, unlawful. However, if the holiday pay element of the rolled-up payments is sufficiently transparent, the employer can set off those payments against money due for the specific period when leave is actually taken. So it actually makes little difference in practice.

The ECJ considered three conjoined cases, one referred by the Court of Appeal and two by the Leeds employment tribunal, namely:

  • Caulfield v Marshalls Clay Products Ltd. (now Hanson Clay Products)
  • Clarke v Frank Staddon Ltd; and,
  • Robinson-Steele v RD Retail Services Ltd

In its decision (which, unusually, departed from the Opinion of the Advocate General), the ECJ ruled:

  • employers cannot simply allocate part of an existing wage packet to holiday pay. The holiday pay must be ADDITIONAL payment to that made in respect of work actually done (para. 52)
  • employers MUST pay holiday pay during the specific period during which the worker takes leave. It is unlawful to stagger payment over the year (para. 63)
  • but if the employer does roll-up extra money in respect of holiday pay, it can set-off the extra money already paid against the payments it ought to make during the specific holiday period. The burden is on the employer to prove the transparency of the payment (paras. 68 and 69).

A storm in a teacup, really. The Court of Appeal said, back in 2004, that rolled-up holiday pay is lawful as long as the rolled-up element is transparently set out (eg on payslips) and a genuine payment in respect of holiday. The ECJ has now said that it's technically unlawful, but that as long as it's transparently set out and a genuine payment in respect of holiays, the payments can be set-off, i.e. no loss for the employees and it doesn't matter a hoot.

Incidentally, as I type this, the TUC has put out a press release claiming the judgment is a great victory for the workforce. But it really isn't - it's a technical victory with almost no practical impact on existing UK law and practice.

Click here to read the ECJ decision in the three conjoined cases

I've had half a dozen Emails telling me about this judgment- I'm not going to name the people, but thanks anyway!